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Why GTT Communications Stock Popped Today

By Steve Symington - Nov 27, 2019 at 2:15PM

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The telecom and ISP company is moving forward with plans to divest noncore assets.

What happened

Shares of GTT Communications ( GTT -2.83% ) are up 18.1% as of 1:45 p.m. EST Wednesday, after the telecommunications company enlisted the help of two financial advisory firms to explore the sale of its infrastructure division.

So what

In a press release late yesterday, GTT said it has hired Credit Suisse and Goldman Sachs as financial advisors for the potential sale, which would include its pan-European fiber network, as well as the subsea transatlantic fiber and data center infrastructure it obtained through its acquisitions of Interoute in 2018 and Hibernia in 2017.

White jigsaw puzzle with an edge piece being removed

IMAGE SOURCE: GETTY IMAGES.

To be fair, this shouldn't be entirely surprising. Just over two weeks ago -- when GTT shares plunged following the release of the company's disappointing quarterly results -- management revealed they had expanded plans to divest nonstrategic and noncore assets to include the aforementioned infrastructure.

Now what

Nonetheless, GTT CEO Rick Calder called the move to hire financial advisors "an important step" in the process, adding: "This potential divestiture in no way alters the execution of GTT's core strategy of providing cloud networking services to large and multinational clients as we deliver on our purpose of connecting people to any location in the world and to every application in the cloud."

In fact, as I suggested earlier this month, the divestitures should help streamline GTT's operations, and improve its financial position as it works back toward achieving sustained, profitable growth. With those plans taking a big step forward yesterday, shares are understandably rallying today in response.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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